Archive for January, 2011
The Department of Housing and Urban Development will release $1 billion in mortgage assistance to the unemployed this spring, a HUD spokesman confirmed to HousingWire Tuesday, after receiving complaints from lawmakers and advocacy groups that HUD was dragging its feet.
More than 60 national consumer advocacy groups called on HUD to implement a program created under Dodd-Frank that would pay up to $50,000 per eligible borrower.
The HUD money comes with a 0% interest rate and is intended to assist homeowners with mortgage payments for up to 24 months. Borrowers must show they have either lost their job or suffer from a medical condition to qualify for the federal funds. Also, a household's yearly income cannot exceed 120% of the area's median income, and the income must have been reduced by at least 15% over the last two years.
The property must be the borrower's primary residence yet on the verge of foreclosure. The funds will compliment an initiative from the Treasury Department for assisting the unemployed through the Hardest Hit Fund. The Treasury breaks down which states get what through its program in the chart below, and HUD's EHLP assistance will go to the other 32 states.
HUD announced the program in August, a month after Dodd-Frank was signed. But in early January, Sen. Bob Casey (D-Pa.) sent a letter to HUD Secretary Shaun Donovan, urging him to disburse the funds he claims were overdue.
Two weeks later, advocates began to push the department as well.
"The program was overdue when it was enacted in July 2010," the groups said in a letter sent to Donovan Jan. 21. "This foreclosure crisis is too severe for such a slow pace of implementation."
A spokesman for HUD said homeowners should be able to apply for the EHLP program sometime during the first quarter of 2011.
"Unfortunately this time table is slower than we initially expected, reflecting implementation challenges for this new and unique program," the spokesman said. "We are committed to ensuring the program is as fair and effective as possible and we will take the necessary time to do that."
The groups met with HUD Tuesday to voice their concerns in person.
"We’re facing disaster and this is our last hope," Sharon Green, an unemployed homeowner in Philadelphia said. "We need this program ASAP. Thousands have already lost their homes and I don’t want to join them."
Write to Jon Prior.
Follow him on Twitter: @JonAPrior
[Update 1: Corrects to nine cities reach new lows, adding city of Chicago.]
Home prices in November dropped 1.6% from the year-ago period and are down 1% from a month earlier, according to the S&P/Case-Shiller composite 20-city home price index —a broad gauge of U.S. home prices. The 10-city composite was down 0.4%.
Home prices were down in 16 of the 20 MSAs compared to a year ago, with just Los Angeles, San Diego, San Francisco and Washington, D.C., showing increases. On a month-to-month comparison in the 20-city composite, 19 of 20 had home price declines with only San Diego recording a scant 0.1% increase.
Nine markets — Atlanta; Charlotte, N.C.; Chicago; Detroit; Las Vegas; Miami; Portland, Ore.; Seattle and Tampa, Fla., — hit their lowest points since home values peaked in 2006 and 2007, meaning that average home prices in those markets have fallen even further than the lows set in the spring of 2009.
Since May 2010, home prices have slid. The 10-city composite has re-entered negative territory with a -0.4% annual growth rate in November, versus the +5.4% reported six months prior in May, and the 20-city composite was down 1.6% in November versus its +4.6% May print.
“With these numbers more analysts will be calling for a double-dip in home prices. Let’s take a moment to define a double-dip as seeing the 10- and 20-city composites set new post-peak lows. The series are now only 4.8% and 3.3% above their April 2009 lows, suggesting that a double-dip could be confirmed before spring.
“With an annual growth rate of +3.5% in November, Washington, D.C., was the strongest market, but still well below the +7.7% annual rate of growth seen in May 2010,” says David M. Blitzer, chairman of the index committee at Standard & Poor's.
Fourteen MSAs and both composites have posted at least four consecutive months of decline with November’s report.
U.S. house prices were unchanged on a seasonally adjusted basis from October to November, according to the Federal Housing Finance Agency's monthly house price index, also released on Tuesday.
The table below (click to expand) summarizes the results for November 2010. The Case-Shiller indices have a base value of 100 in January 2000. So a current index value of 150 translates to a 50% appreciation rate since January 2000.
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
The mortgage servicing industry is in the middle of its worst nightmare: being forced to do something it doesn't want to do.
And things are going to get worse. But this time, it won't be the mortgage servicers thrown to the wolves. It will be holders of 30-year, fixed-rate mortgages who remain current on their loans.
Treasury Department Secretary Timothy Geithner and Department of Housing and Urban Development Secretary Shaun Donovan supported the latest initiative to raise mortgage servicing fees, so that businesses can competitively compensate attention to loans.
"The current model has not motivated mortgage servicers to invest the time, effort and resources needed to fully explore all options to help delinquent borrowers avoid foreclosure," they wrote in a letter to Edward DeMarco of the Federal Housing Finance Agency. "As we move ahead on a comprehensive plan to reform the nation's housing finance system, addressing this issue will help better protect homeowners, investors and taxpayers, while also increasing efficiency and competition in that market."
It's a sliding scale. Mortgage borrowers who pay mortgage servicers month in and month out will get the least amount of attention. People more than 60 days delinquent, and up the default chain, will get the most.
Keep in mind the aim is to avoid foreclosure as well, so staying in the home is doubly incentivized, both for the servicer and distressed borrower. If the borrower is suddenly shut out of the property and the mortgage ends, the higher fees end as well.
So where will the money to pay these fees come from?
The amount of outstanding mortgage debt continues to fall. The absorption rate on supply is unthinkable, let alone achievable. The refi wave is more like a ripple and those that do refinance tend to do so to get shorter mortgages.
Total revenue passing to mortgage servicers is at an all time low, as efficiencies drop at America's largest mortgage companies, according to the Mortgage Bankers Association (below chart).
Meanwhile, interest rates are likely to inch up, creating potential capacity issues, according to Laurie Goodman at Amherst Securities: "Another possibility is that at these higher rates, originators will be left with unused capacity," she said. "During prior refi waves, originators focused efforts on the most profitable loans; after the refi wave they turned their attention to the more difficult to refinance and less valuable loans."
Two things: The housing market is really shook up, and the industry is not good at enacting change.
So here comes this idea to change fees in a way that adds to cost but not to revenue.
This only means higher rates for borrowers who are best at paying their bills. And more attention for those who aren't.
Analysts at JPMorgan still see some investor backlash to the proposed changes as they stand, and don't expect any movement until 2012 at least.
If Campbell Surveys is correct in saying that demand for buying homes among potential homeowners is getting stronger, well then that's good news. The industry will need those new borrowers to pay for the old loans.
Write to Jacob Gaffney.
Follow him on Twitter @JacobGaffney.
Tags: amherst securities, Mortgage Servicing fees
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